The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.[citation needed] Some provisions such as Regulation Q that allowed the Federal Reserve to regulate interest rates in savings accounts were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999 by a bipartisan, conference committee version of the Gramm-Leach-Bliley Act signed by President Bill Clinton.

(Michael here: That is from Wikipedia, and very accurate. We're into one of my areas here. I did a major research paper on that depository institution deregulation & monetary control act of 1980. Bill Bradley was a major architect, and it was the most sweeping changes in the financial industry since glass-steagall. Talk to you soon...Mike)

[2:06:33 PM] Michael Roth says: (Michael here again: This is the rest of the page; it is a little long, but this page effectively explains how the situation we are currently in was allowed to happen. But remember, this did not happen due to one event; is has been a chain reaction of multiple events, building up w/increasing speed over the past 2 years...)

Two separate United States laws are known as the Glass-Steagall Act. The Acts (Glass & Steagall) were both reactions of the U.S. government to cope with the collapse of a large portion of the American commercial banking system in early 1933. While many economic histories attribute the collapse to the economic problems which followed the Stock Market Crash of 1929 it is clear that the U.S. banking collapse of 1933, which came three and a half years later, could only have been partially the result of the stock market collapse in October 1929.

The Republican Hoover administration had lost the November 1932 election to Franklin Delano Roosevelt, but his administration did not take office until March 1933. The lame duck Hoover Administration and the incoming Roosevelt Administration could not, or would not, coordinate actions to stop the run on banks affiliated with the Henry Ford family that began in Detroit Michigan in January 1933. The Federal Reserve chairman Eugene Meyer was equally ineffectual.

Both bills were sponsored by Democratic Senator Carter Glass of Lynchburg, Virginia, a former Secretary of the Treasury, and Democratic Congressman Henry B. Steagall of Alabama, Chairman of the House Committee on Banking and Currency.

Congressional Research Service Summary:

In the nineteenth and early twentieth centuries, bankers and brokers were sometimes indistinguishable. Then, in the Great Depression after 1929, Congress examined the mixing of the “commercial” and “investment” banking industries that occurred in the 1920s. Hearings revealed conflicts of interest and fraud in some banking institutions’ securities activities. A formidable barrier to the mixing of these activities was then set up by the Glass Steagall Act.[4]

[edit] First Glass-Steagall Act

The first Glass-Steagall Act was the first time currency (non-specie, paper currency etc.) was permitted to be allocated for the federal reserve. In addition, the G.S.A. separated investment banking from commercial banking, in effect curbing speculation. The resulting FDIC (Federal Deposit Insurance Corporation) insured all bank deposits up to $5000.

The Glass Steagall Act, as well as FDIC, CCC (Civilian Conservation Corps), Emergency Banking Act, and the TVA (Tennessee Valley Authority) were all products of Roosevelts 'Hundred Days', Roosevelt's first one hundred in office.[5]

[edit] Second Glass-Steagall Act

The second Glass-Steagall Act, passed on 16 June 1933, and officially named the Banking Act of 1933, introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Company for insuring bank deposits.[citation needed]

Literature in economics usually refers to this simply as the Glass-Steagall Act, since it had a stronger impact on US banking regulation.[citation needed]

[edit] Impact on other countries

The Glass-Steagall Act has had influence on the financial systems of other areas such as mainland China which maintains a separation between commercial banking and the securities industries.[6][7]

Repeal of the Act

See also Depository Institutions Deregulation and Monetary Control Act passed in 1980, the Garn-St. Germain Depository Institutions Act deregulating the Savings and Loan industry in 1982, and the Gramm-Leach-Bliley Act in 1999.

The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA) in 1999. The bills were passed by a 54-44 vote along party lines with Republican support in the Senate[8] and by a 343-86 vote in the House of Representatives[9]. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bipartisan bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. Without forcing a veto vote, this bipartisan, veto proof legislation was signed into law by President Bill Clinton on November 12, 1999. [10]

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.[11]

The repeal enabled commercial lenders such as Citigroup, the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities.[citation needed] Citigroup played a major part in the repeal. Then called Citicorp, the company merged with Travelers Insurance company the year before using loopholes in Glass-Steagall that allowed for temporary exemptions. With lobbying led by Roger Levy, the "finance, insurance and real estate industries together are regularly the largest campaign contributors and biggest spenders on lobbying of all business sectors [in 1999]. They laid out more than $200 million for lobbying in 1998, according to the Center for Responsive Politics..." These industries succeeded in their two decades long effort to repeal the act.[12]

The argument for preserving Glass-Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit – lending – and the use of credit – investing – by the same entity, which led to abuses that originally produced the Act

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

The argument against preserving the Act (as written in 1987):

1. Depository institutions will now operate in “deregulated” financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.

2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.

3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them – by diversification.

4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation

And they all painted 'Unfair!' picket signs and marched around and around the little red hen, shouting obscenities.

Then the farmer (Obama) came. He said to the little red hen, 'You must not be so greedy.'

'But I earned the bread,' said the little red hen.

'Exactly,' said Barack the farmer. 'That is what makes our free enterprise system so wonderful. Anyone in the barnyard can earn as much as he wants. But under our modern government regulations, the productive workers must divide the fruits of their labor with those who are lazy and idle.'

And they all lived happily ever after, including the little red hen, who smiled and clucked, 'I am grateful, for now I truly understand.'

But her neighbors became quite disappointed in her. She never again baked bread because she joined the 'party' and got her bread free. And all the Democrats smiled. 'Fairness' had been established.

Individual initiative had died, but nobody noticed; perhaps no one cared...so long as there was free bread that 'the rich' were paying for.

EPILOGUE

Bill Clinton is getting $12 million for his memoirs.

Hillary got $8 million for hers.

That's $20 million for the memories from two people, who for eight years, repeatedly testified, under oath, that they couldn't remember anything.

Tuesday, September 23, 2008

"Liberty means responsibility. That is why most men dread it." - George Bernard Shaw

A half century ago, Russian-born writer Ayn Rand warned about the creeping socialism she saw in America even then. In her thousand-page tome, "Atlas Shrugged," Rand told the story of John Galt, a shadowy figure who is so fed up with high taxes, burdensome regulations and interference from government, he secretly recruits the best and brightest of American capitalism - the captains of industry - to withdraw from society to the mountains of Colorado, leaving the growing welfare state without any visible means of support.

Imagine what Ayn Rand would say about the federal government coughing up quantities of cash even career bureaucrats didn't talk about in the 1950s; all to bail out quasi-government entities whose overseers were complicit in the failures of those very institutions.

Republicans and Democrats alike share the blame for this mess. It was largely created out of a misguided need (mostly by Democrats) to feel as though America was actually doing something to help the poor own their own homes. This may be a worthwhile goal, but when people who have absolutely no hope of paying back loans are approved to buy a home, one has to ask, "Who is going to pick up the tab for all this?" Answer: You are, to the tune of at least a trillion dollars, a sum most of us cannot even fathom.

Over the last decade, Democrats like U.S. Rep. Barney Frank, D-MA, chairman of the House Financial Services Committee, and U.S. Sen. Christopher Dodd, D-CN, chairman of the Senate Banking Committee, have insisted that these ridiculous loans be made. Former Attorney General Janet Reno, carrying out the wishes of her boss, threatened legal action against any institution that discriminated or "redlined." I was very disappointed to hear John McCain say on CBS's "60 Minutes" that he admired New York State Attorney General Andrew Cuomo and would consider him to head up the Securities and Exchange Commission. As Bill Clinton's Secretary of Housing and Urban Development (HUD), Cuomo was up to his eyeballs pushing the sub-prime mortgages that started these dominoes tipping in the first place.

And where were Newt Gingrich and the Republicans in the 1990s when Clinton and his cronies were building this house of cards? The GOP held the House and the Senate during most of Clinton's tenure. After 2000, they also held the White House. Why did this situation continue?

The rule in Washington seems to be this: If you squander your money and fail to provide for yourself, the government will take care of you. If you save, invest wisely and prepare for your retirement, you will be penalized in order to pay for those who did not. A perfect example was the tax increase passed by Clinton and the Democrats who still controlled Congress during the first two years of his administration. Seniors who had saved and invested for retirement, and who made more than $34,000 ($44,000 per couple) received a tax increase under that plan.

Sunday, September 21, 2008

The biggest argument against democracy is a five minute discussion with the average voter.

We are all worms, but I do believe I am a glowworm.

If Hitler invaded Hell, I would make at least a favourable reference to the devil in the House of Commons.

I am prepared to meet my maker; whether my maker is prepared for the great ordeal of meeting me is another matter.

Democracy is the worst form of government except all those other forms that have been tried from time to time.

A nation trying to tax itself into prosperity is like a man standing in a bucket and trying to pull himself up by the handles.

There are a terrible lot of lies going around the world, and the worst of it is half of them are true.

The United States invariably does the right thing, after having exhausted every other alternative.

A modest man, who has much to be modest about. (Referring to Clement Attlee)

A sheep in sheep’s clothing. (Referring to Ramsay MacDonald)

He has all the virtues I dislike and none of the vices I admire. (Referring to Sir Stafford Cripps)

He is the man who brought pederasty into disrepute. (Referring to Tom Driberg)

He looks like a female llama who has been surprised in the bath. (Referring to Charles De Gaulle)

If you wanted nothing done at all, Balfour was the man for the job. (Referring to Arthur Balfour)

Lady Nancy Astor: Winston, if I were your wife, I’d poison your tea.Churchill: Nancy, if I were your husband, I’d drink it

Bessie Braddock: Sir, you are drunk.Churchill: And you, madam, are ugly. But in the morning, I shall be sober.

Young man (after seeing Churchill leave the bathroom without washing his hands): At Eton they taught us to wash our hands after using the toilet.Churchill: At Harrow they taught us not to piss on our hands.

Churchill: Madam, would you sleep with me for five million pounds?Woman: My goodness, Mr. Churchill… Well, I suppose… we would have to discuss terms, of course…Churchill: Would you sleep with me for five pounds?Woman: Mr. Churchill, what kind of woman do you think I am?!Churchill: Madam, we’ve already established that. Now we are haggling about the price.

HELP!

Has the GOP abandoned us?

What would Ronnie say?

Government's view of the economycould be summed up in a few shortphrases:If it moves,tax it.If it keeps moving,regulate it.And if it stops moving,subsidize it.-- Ronald Reagan"We've gone astray from first principles. We've lost sight of the rulethat individual freedom and ingenuity are at the very core of everythingthat we've accomplished. Government's first duty is to protect the people,not run their lives." ---Ronald Reagan (http://Reagan2020.US/)

the best one-liner ever

right links

election quotes

"Vote for the man who promises least; he'll be the leastdisappointing." ---Bernard Baruch

"In order to become the master, the politician poses as theservant." ---Charles de Gaulle

"If a politician found he had cannibals among his constituents, he wouldpromise them missionaries for dinner." ---H. L. Mencken

"We'd all like to vote for the best man but he's never a candidate." ---KinHubbard

LGF headlines

What would Ronnie do?

Bobby Jindal, the new Reagan?

if I were aliberal Democrat from a bluestate, I’d want to stop lookingback at Reagan, too. But asconservatives, we should look tohim as a great leader and a greatexample of the success we canenjoy by going back to ourprinciples. Take Louisiana. Thestorms didn’t cause all theproblems for Louisiana; theyrevealed a lot of the problems. Itis frustrating to see Republicansrush in to put billions of dollarsinto the same programs thatdidn’t work before the storms,instead of being more bold. Webelieve that private health carecoverage, not government-runhealth care, works. Why notimplement that, now thatwe’ve got such an opportunityto rebuild the health careinfrastructure?